The 1991 financial crisis in India is instructive. Having tried to save the embattled rupee, India was left with sufficient reserves to cover three weeks of imports and was on the verge of default. The newly appointed government approached the IMF for a $2.2 billion loan that would hinged on a set of conditions demanding that India reduce its budget deficit, open its markets to foreign competition, diminish its maze of licensing requirements, cut subsidies, and liberalize investment. India was also required to provide 67 tonnes of gold as collateral.
After a decade of decline, India was left no ‘soft options’, and the economic liberisation was the turning point. Manmohan Singh, the Finance Minister at the time and now Prime Minister, was credited with unleashing the ‘caged tiger’ that led to India’s sustained economic growth.
In a 2012 report in which Standard & Poor’s voiced the potential that India’s credit standing was on the verge of downgrade, they concluded “It would be ironic if a government under the economist who spurred much of the liberalization of India’s economy and helped unleash such gains were to preside over their potential erosion.1”
Getting team India to win again
Getting team India to win again – poverty
Getting team India to win again – infrastructure
Getting team India to win again – fiscal consolidation
Getting team India to win again – the plan
Economic Crisis Forcing Once Self-Reliant India to Seek Aid
India 1991 Country Economic Memorandum
What Caused the 1991 Currency Crisis in India?
Will India Be The First BRIC Fallen Angel?